The USS Nautilus was the first nuclear-powered submarine, and it was powered by a Westinghouse reactor. U.S. Navy

 

SASKATOON, TORONTO – On January 17, 1955, the USS Nautilus cast off its mooring lines from the pier at Groton, Connecticut. Commander Eugene P. Wilkinson signalled, “Underway on nuclear power.”

That was the maiden voyage of the very first nuclear submarine in the world. And in its bowels churned a small nuclear reactor. A Westinghouse reactor.

Thus, Westinghouse has been at the forefront of nuclear technology, and specifically small reactors, since the very beginning. The U.S. Navy’s Nimitz-class aircraft carriers are propelled by Westinghouse reactors.

And on Oct. 11, Saskatoon-based Cameco Corporation announced that it and Toronto-based Brookfield Renewable Partners, together with institutional partners, were forming a strategic partnership to acquire Westinghouse Electric Company, one of the world’s largest nuclear services businesses.

Westinghouse had a presence at the Sept. 28 SIMSA Saskatchewan Energy Suppliers Forum in Regina. The company is promoting its eVinci micro reactors, which are five megawatts in size.

Westinghouse

 

Brookfield Renewable, with its institutional partners, will own a 51 per cent interest in Westinghouse and Cameco will own 49 per cent.

“Bringing together Cameco’s expertise in the nuclear industry with Brookfield Renewable’s expertise in clean energy positions nuclear power at the heart of the energy transition and creates a powerful platform for strategic growth across the nuclear sector,” Cameco said in a press release.

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The total enterprise value for Westinghouse is $7.875 billion. Westinghouse’s existing debt structure will remain in place, leaving an estimated $4.5 billion equity cost to the consortium, subject to closing adjustments. This equity cost will be shared proportionately between Brookfield and its institutional partners (approximately $2.3 billion) and Cameco (approximately $2.2 billion).

Brookfield Renewable is pursuing this opportunity through the Brookfield Global Transition Fund I, which is the largest fund in the world focused on the energy transition, Cameco said. Brookfield Renewable, which has significant available liquidity, expects to invest approximately $750 million to acquire an approximate 17 per cent interest in Westinghouse, which will be funded through normal course funding initiatives, including asset level upfinancings and asset recycling.

Cameco said it currently has available liquidity and committed financing facilities for the purposes of supporting the transaction to acquire a 49 per cent share in Westinghouse. However, Cameco will be pursuing a permanent financing mix of capital sources (cash, debt and equity), designed to preserve the company’s balance sheet and ratings strength while maintaining its liquidity, prior to closing.

The aircraft carrier USS George W. Bush is powered by two Westinghouse nuclear reactors. U.S Navy

 

On the same day, Cameco announced that it has entered into an agreement with a syndicate of underwriters led by CIBC Capital Markets and Goldman Sachs & Co. LLC, pursuant to which the underwriters have agreed to purchase, on a bought deal basis, 29,615,000 common shares of Cameco at a price of $21.95 per share, for gross proceeds to us of approximately $650 million. The common shares will be offered to the public in Canada and the United States. The offering is expected to close on or about October 17, 2022, subject to customary closing conditions, including receipt of all necessary approvals of the Toronto Stock Exchange and the New York Stock Exchange.

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The release noted Brookfield Renewable is among the world’s largest investors in clean energy and transition assets, with approximately 125,000 MW of operating and development capacity worldwide.

Cameco is one of the largest global suppliers of uranium fuel for nuclear energy, with extensive uranium mining and milling operations, as well as refining and conversion facilities and CANDU fuel fabrication for heavy water reactors.

Westinghouse services about half the nuclear power generation sector and is the original equipment manufacturer to more than half the global nuclear reactor fleet. The company has industry-leading intellectual property and a specialized workforce of roughly 9,000 employees capable of operating in highly regulated markets around the world.

Approximately 85 per cent of Westinghouse’s revenue has come from long-term contracted or highly recurring customer service provision with a nearly 100 per cent customer retention rate given its comprehensive services offerings and position as an original equipment manufacturer, providing stability in all macroeconomic environments.

The release noted, “With strong growth projected in the nuclear energy market, Westinghouse is well positioned to increase business in its core fuel and services segments, execute on the growing pipeline for extending and uprating nuclear power plants, and service the rising demand for new utility-scale and modular baseload nuclear power generation.

“Cameco and Brookfield Renewable are well placed to build a global player in the clean-energy transition. The acquisition is expected to align Cameco’s uranium production and fuel services capabilities with Westinghouse’s downstream capabilities to potentially offer utilities a highly competitive nuclear fuel solution to deliver value for existing and new customers. This could include offering customers more efficient access to fuel supplies sourced in North America and Europe.”

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Tim Gitzel, president and CEO of Cameco, said, “We’re witnessing some of the best market fundamentals we’ve ever seen in the nuclear energy sector. As one of the few forms of electricity generation capable of safely, reliably and affordably producing emissions-free, baseload power, nuclear energy is becoming increasingly important in a world that prioritizes electrification, decarbonization and energy security. The opportunity to partner with Brookfield Renewable, a leader in the clean-energy space, to acquire Westinghouse is expected to create a platform for growth across the nuclear value chain. Coupled with our more than 30-year proven track record of providing secure and reliable fuel supplies to a global customer base, this transaction fits perfectly within Cameco’s strategy and is expected to increase our ability to meet the growing needs of existing and new customers at a time when origin and security of supply is of significant concern. At the same time, we expect the recurring demand for Westinghouse’s operating plant services and nuclear fuel will generate a strong revenue stream and add stable cash flow to complement Cameco’s existing uranium and fuel services business.”

Mark Carney, Brookfield vice chair and head of Transition Investing, said, “Every credible net-zero pathway relies on significant growth in nuclear power. It is an essential, reliable zero-carbon technology that directly displaces fossil fuels and supports the growth of renewables by providing critical baseload to our grids. The partnership of Brookfield and Cameco will help drive forward the growth of nuclear power the world needs for its clean energy transition.”

Connor Teskey, CEO of Brookfield Renewable, said, “Westinghouse has successfully refocused on providing core services to the nuclear industry and is ready for the next phase of growth. The business aligns well with our existing portfolio, delivering highly contracted and dependable revenue by serving customers who operate critical clean energy assets. Partnering with Cameco brings deep nuclear sector expertise, alongside our knowledge of energy markets and global customer base, to form a formidable champion for nuclear power. We see significant potential to grow the business and deliver on broader growth in the nuclear power sector through our strategic partnership with Cameco.”

With conventional coal-fired power generation seen as a leading causes of anthropogenic climate change, nuclear power is the one of the only zero-emission, baseload sources of electricity currently available at scale. Driven by electrification, decarbonization and energy security benefits, an estimated 400 GW of additional nuclear capacity will be needed by 2050, Cameco said. It noted nuclear power is experiencing a resurgence around the world with more than 20 countries across the Americas, Europe, the Middle East and Asia pursuing new projects or plant extensions. More than 50 GW of plant extensions have been announced to date and more than 60 GW of new-build reactors are expected between 2020-2040.

Westinghouse has four key business lines:

  • Operating Plant Services: Recurring service provider for outages and maintenance, engineering solutions, and replacement components and parts.
  • Nuclear Fuel: Long-term contracting for the manufacturing and installation of fuel assemblies and other ancillary equipment across multiple light water reactor technologies, including as the original equipment manufacturer for approximately half the nuclear plants worldwide.
  • Energy Systems: Designing, engineering and supporting the development of new nuclear reactors.
  • Environmental Services: Services to government and commercial customers that support nuclear sustainability, environmental stewardship and remediation.

 

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